The “low tax” lie: States that tout their low tax rates only pay low taxes to the rich.

It's hard to go a week without seeing a politician or news story trumpeting a state that everyone can or should move to because of its low taxes. However, there are major problems with these declarations. That's not true.

In fact, the most high-profile states, such as Florida, Tennessee, and Texas, have low taxes only for the wealthy. These states impose average taxes on middle-class families and some of the highest taxes in the nation on low-income and working-class families. The reason is that the state's tax laws are regressive, with the highest income earners paying the lowest share of taxes and vice versa.

That's one of the key points of Who Pays? These are the results of a recent study published by the Institute for Tax and Economic Policy, of which I am deputy director. This is the only analysis across 50 states that shows how state and local tax laws affect households across the income scale.

Take Florida, for example. Despite Florida's reputation for taking a lot of people away from northeastern states with its low taxes (we're not even talking about the beaches or the warmer climate), Florida has low taxes only for those at higher income levels. It is characterized by Only the wealthiest 1% of households have the lowest effective tax rate on their income.

Meanwhile, the lowest 40% of households in the state pay a higher percentage of their income in taxes than the highest 1% of households in Florida and the bottom 40% of households nationally. And they often pay much higher taxes than low-income households in many commonly known “high-tax” states, such as California, Massachusetts, and New Jersey.

Our research shows that Florida is the worst state in the country when it comes to tax fairness. The state's tax code dramatically worsens income inequality more than any other state. No wonder, since the lowest 20 percent of households pay nearly five times as much in taxes as the richest earners.

The same goes for Tennessee and Texas, which, like Florida, have no personal income tax. As a result, the top 1 percent of income earners in these states pay a much lower share of their income than the poorest households, due to their reliance on sales and other taxes. According to our calculations, Tennessee's tax code is her third worst for inequality, and Texas's is her seventh worst.

The state's lack of a personal income tax is the biggest source of tax inequality, meaning those with the least pay the most. Of the 10 states with the most regressive tax laws, six have no personal income tax, while two have a flat income tax.

The lack of a state income tax has two major implications. First, states and local governments are forced to rely on other types of taxes (most often sales and excise taxes) to raise the funds needed to pay for government services.

However, sales and excise taxes are regressive, requiring a larger share of the income of low- and middle-income households than wealthy households, because rich households take a smaller share of their income than poor households. Masu. This is why, as our report states, “poor households pay nearly seven times more than their income in these taxes than wealthy households.”

Second, personal income taxes, particularly progressive taxes in which tax rates rise as income increases, are the most progressive that states can impose and are the most clearly based on ability to pay. Without an income tax, states would not only have to rely more heavily on other regressive taxes, but they would also not be able to take advantage of the progressivity of the income tax to equalize the total tax bill.

While these “low-tax” states exacerbate inequality, many states do the opposite, creating opportunities for everyone with fairer tax systems. For example, Minnesota and Vermont combine progressive, graduated income taxes with strong policies for workers and their families, such as the child tax credit and the earned income tax credit. This would reduce reliance on regressive sales taxes and create a more ability-to-pay system.

As our detailed analysis of state tax systems reveals, whenever you hear that a state's taxes are low, it's important to ask a simple question: “Low for whom?” Often the answer is “rich.” But as many other states have shown, it doesn't have to be this way.

John Whiten is Deputy Director of the Institute on Taxation and Economic Policy, a nonprofit, nonpartisan organization that works to create a fair and sustainable tax system.